Buying a New Build: How Property Valuations Actually Work
Disclaimer: The below guide is general in nature and do seek individual financial advice to see how this applies to your situation. Our experienced advisers are on hand to help at no cost to you (T’s and C’s apply)
Buying a brand-new home—whether it is fresh off the plans or just recently finished—is incredibly exciting. You get a warm, dry house, modern design trends, and you often get to skip the stressful bidding wars of the existing housing market.
But when it comes to getting your mortgage unconditionally approved, new builds introduce a unique hurdle: How does a bank value a house that doesn't even exist yet?
If you are buying a new build, your mortgage adviser will likely talk to you about the valuation process. Here is your completely jargon-free guide on what they are, why you might need two of them, and some exciting recent banking changes that could save you hundreds of dollars.
Scenario A: The "Turnkey" Property
A turnkey property is exactly what it sounds like: you sign a fixed-price contract, pay a small deposit upfront (usually 10%), and you don't pay another cent until the house is completely finished and you can "turn the key" in the front door.
Do You Need a Valuation for a Turnkey?
In the past, nearly all lenders required a registered valuation for turnkey properties to prove the house was actually worth the purchase price.
However, the rules are changing rapidly!
The Turnkey Exemption: Today, if you are buying a turnkey property through a licensed real estate agent or a recognized, reputable developer, some major banks are now waiving the valuation requirement entirely.
If you want to know if your specific property qualifies to skip the valuation, get in touch with our team. We can match your contract with a lender who offers this exemption, potentially saving you over $1,000 right off the bat.
Scenario B: The "Construction" Loan (Progress Payments)
If you are buying a piece of land and hiring a builder to construct a house (or doing a massive renovation), you will use a Construction Loan. Instead of paying one lump sum at the end, the bank releases your loan in stages (called "progress drawdowns") as the builder finishes the foundations, the framing, the roof, etc.
Because the bank is releasing money while the house is still a pile of timber and concrete, they are incredibly strict. This traditionally triggers the "Two-Step" Valuation Process:
Step 1: The First Valuation ("As-If-Complete")
Before the bank lends you a single dollar to start digging dirt, the valuer will base their assessment entirely on the builder's architectural plans. They will review the floor area, the bedrooms, the location, and your fixed-price building contract. Based on this, they will give the bank a finalized "as-if-complete" value—let’s say, $700,000.
The Cost: Typically around $1,000-1,400.
The Timing: This valuation is only valid for up to 12 months. Because construction can experience delays due to weather or supply chains, we strongly recommend holding off and getting this valuation done only when you are confidently within 12 months of finishing.
Step 2: The Final Valuer's Certificate
When the house is finally built, the bank needs proof that the builder actually delivered what was promised on the plans before they release the final payment. The valuer will physically visit the finished property and issue a "Final Valuer's Certificate."
The Cost: Typically around $350-500.
What it does: At this point, the valuer is not giving the house a new valuation—it will not come out higher or lower than the first amount. They are merely confirming that the home was built to the original specifications and that the original $700,000 valuation still stands.
The Good News: Just like turnkey loans, some banks are now waiving the need for this second certificate for standard builds, allowing you to bypass this extra cost at the finish line!
What If the Valuation Comes Back Lower Than the Purchase Price?
This is a bit of a pickle—but don't panic! We have been here before.
Let's say you agreed to buy a turnkey house for $750,000, or your land and build contract totals $750,000. If the valuer looks at the plans and says the finished product will only be worth $700,000, the bank will only lend against that lower number.
It can be very tempting to bury your head in the sand when this happens, but the absolute best thing you can do is assemble your team (your mortgage adviser and your solicitor) immediately.
We have a number of powerful tools available to navigate this:
Renegotiate with the Builder: We have worked with solicitors who are highly skilled at negotiating these exact issues to get the developer to lower the final purchase price to match the valuation.
Rework the Lending: We can look at restructuring your deposit, utilizing different loan structures, or moving your application to a lender with a different set of rules.
Vendor Finance: In some cases, the developer might agree to leave some money in the deal to bridge the gap.
How to Order Your Valuation
Do not try to order the valuation yourself!
Banks require valuations to be ordered through their secure, independent portals to ensure complete neutrality. If you call a valuer directly, the bank can reject the report.
Your adviser will be the one to order these valuations for you at the exact right time. Your only role in this process is to sit back, check your email for the secure link, and pay the fee online.
